Azerbaijan took a shock early lead and, despite plenty of chances for Northern Ireland, the hosts only equalised in the 96th minute as the match finished 1-1.
Davis believes that his side could have won multiple games with the chances they created, and admitted that only getting a point is a massive blow to their hopes of qualification.
"We created enough chances to win two or three games but we simply couldn't find the net and when we finally did it was too late. I don't think I've played in a Northern Ireland performance where we've created so much, so many clear-cut chances," said Davis.
"I thought the performance merited the win, but it wasn't to be.
"It's going to make it really difficult. I thought if we won tonight it would put us in a position with three home games to come where we might have had a chance of doing something, but obviously this is a major blow. But we'll keep going."
Northern Ireland have now picked up three points from their four games in Group F, leaving them fourth in the group.